Maximizing Recoveries from Post-Confirmation Litigation: Part II

Some debtors form a “litigation trust” as part of their chapter 11 plan to pursue plaintiff-side litigation after they exit bankruptcy. Successful plaintiff-side litigation can result in meaningful distributions
to a debtor’s constituents. There are several issues to address preconfirmation — and sometimes even prebankruptcy — to maximize recoveries from postconfirmation litigation.

Part I of this two-part series highlighted key ways for creditors receiving interests in litigation trusts (i.e., “litigation trust beneficiaries”) to minimize risks and maximize recoveries from postconfirmation
litigation by focusing on a debtor’s directors’ and officers’ liability insurance. Part II explains why litigation trust beneficiaries who want to minimize risks and maximize potential recoveries from litigation should focus on preserving causes of action, reviewing release and exculpation provisions, transferring litigation privileges and enhancing protections for litigation trusts, and exploring the possibilities of using litigation funding to maximize recoveries.

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